Plans for Newfoundland and Labrador Student Loan Tax Credit announced

Youth Services and Post-Secondary Education Minister Anna Thistle is pleased to advise that the proposed tax credit announced in Budget 2003 for graduates repaying their Newfoundland and Labrador student loans will be implemented and expanded to include an enhanced tax credit for single parents with dependents and those who qualify for the disability tax credit. This Student Loan Tax Credit will directly assist over 20,000 graduates currently working in the province in repaying their provincial student loan, and will be effective for taxation year 2003.

This change is being made in response to concerns raised during a roundtable discussion with student groups on May 27, 2003. "I am delighted with the input from the student groups at the roundtable," said Minister Thistle. "Their response to this tax incentive was instrumental in providing direction to government on the need for the change which we are implementing."

By way of example, an individual with a yearly taxable income of $30,000 will receive a tax credit of $200 if they pay $1,000 on the principal of their Newfoundland and Labrador student loan. For single parents with dependents and those eligible for the disability tax credit in the same income bracket and making the same principal payment, they will receive a tax credit of $300.

"The overhaul of the student loans program in 2002 was designed to provide incentives to students enrolled in post-secondary education. The new tax credit provides an incentive to graduates with student loans who are working in the province," said Minister Thistle. "This tax credit is unique in Canada and is one of the many positive steps this government has taken towards helping to reduce student debt."

Media contact: Kathy Dicks-Peyton, Communications, (709) 729-6573

BACKGROUNDER

Government will implement a new tax credit related to payments on the principal portion of Newfoundland and Labrador student loans. Effective for the 2003 tax year, a non-refundable tax credit will apply to principal payments on Newfoundland and Labrador student loans.

Individuals with taxable income less than or equal to $30,000 are eligible for a tax credit amounting to 20 per cent of principal payments made in that year. As taxable income increases from $30,000 to $50,000, the tax credit rate will gradually reduce from 20 per cent to five per cent. The tax credit will not apply at taxable income greater than $50,000.

A larger tax credit is available for single parents with dependents and persons with disabilities. The credit will be 10 per cent higher for these groups. For the purpose of this enhanced credit, a single parent qualifies if he/she is eligible to claim the equivalent to spouse tax credit for a dependent child. A person with disabilities qualifies if that person is eligible to claim the disability tax credit.

The following table illustrates the income tax savings for various levels of taxable income, if an individual repaid $1,000 of the principal portion of a Newfoundland and Labrador student loan.

The Newfoundland and Labrador Student Loan Tax Credit will provide a tax credit of $200 to a person with a taxable income of less than or equal to $30,000, who repays $1,000 of the principal of his/her Newfoundland and Labrador student loan. For single parents with dependents and those eligible for the disability tax credit, a tax credit of $300 will be available.

This tax credit is unique in Canada and will provide tax savings estimated at over $3 million annually. It is designed to help graduates who are working in the province and repaying their Newfoundland and Labrador student loans.

2003 06 11                                      3:00 p.m.